The Daily Shot: 20-Aug-20
• Equities
• Credit
• Rates
• Commodities
• Energy
• Emerging Markets
• The United Kingdom
• The Eurozone
• Canada
• The United States
• Global Developments
• Food for Thought
Equities
1. The US dollar bounced from the lows after the Fed minutes were released. Some have suggested that the market response was due to the Fed’s rejection of yield-curve control as a policy tool. It is used by several central banks, notably the BoJ.
Here is how stock futures reacted to a stronger dollar.
The dollar weakness has provided support for US stocks this year, and investors a jittery about this trend reversing.
Source: BofA Merrill Lynch Global Research, @WallStJesus
The pullback in risk assets is not unique to US stocks. Here is Bloomberg’s global risk-on index.
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2. Only about 6% of the S&P 500 members are making new 52-week highs.
Source: @LizAnnSonders, @Bloomberg, @TheTerminal, Bloomberg Finance L.P.
3. Here is the S&P 500 seasonal performance during elections years.
Source: BofA Merrill Lynch Global Research, @WallStJesus
Sector dispersion increases around presidential elections.
Source: S&P Global Market Intelligence
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4. Are we in a reflation cycle?
Source: @carlquintanilla, @rsluymer
5. Stocks favored by retail investors continue to outperform.
5. Given the depressed Treasury yields (green line in chart below), is there more upside for dividend stocks (red line), which investors have been avoiding (2nd chart)?
Source: Pavilion Global Markets
Source: Pavilion Global Markets
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6. Most sentiment indicators have been showing extreme optimism, except for the AAII index (third panel). Part of the reason is that the American Association of Individual Investors survey focuses on older investors who have been persistently nervous.
Source: @LeutholdGroup
7. Currency market implied volatility has diverged from VIX. A worrisome signal for stocks?
Source: @markets Read full article
8. Next, we have some sector updates.
• Relative performance since the February highs:
Source: S&P Global Market Intelligence
• Investor allocations:
Source: BofA Merrill Lynch Global Research, @Saburgs
• The SPDR Financials ETF (XLF) is at support relative to the S&P 500.
Source: @DantesOutlook
Credit
1. The corporate investment-grade (IG) bond market looks increasingly risky.
• The concentration of BBB names keeps climbing.
Source: @LPCLoans, @refinitiv
• The concentration of longer-duration bonds is also rising.
Source: Deutsche Bank Research
This chart shows the IG market spread duration (sensitivity to widening spreads).
Source: Deutsche Bank Research
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2. In the US, automotive and independent energy companies are most impacted by high-yield ratings, according to UBS, …
Source: UBS Read full article
… and in Europe, banking and autos are most impacted.
Source: UBS Read full article
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3. This chart shows this year’s US corporate bond yield changes, by rating.
Source: @WSJ Read full article
4. A record number of leveraged loans got covenant relief as earnings plummetted.
Source: @lcdnews
5. Here is the AUM of leveraged loan mutual funds and ETFs vs. CLOs.
Source: @LPCLoans
Rates
1. US 10yr real yields are now below the neutral rate of interest.
Source: Danske Bank
2. The 10yr Treasury futures are holding support.
Source: @DantesOutlook
3. This year’s 10yr yield decline has been sharper than in previous recessions.
Source: @ISABELNET_SA, @jpmorgan
4. Fundamentals point to higher yields (2 charts).
Source: @ISABELNET_SA, @MorganStanley
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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5. A steepening bias builds as long as the Fed stays on hold, according to Oxford Economics.
Source: Oxford Economics
6. This scatterplot shows the fed funds – IOER spread vs. reserves (lower liquidity results in higher interbank rates).
Source: BofA Merrill Lynch Global Research
Commodities
1. The Fed’s yield control rejection put some downward pressure on gold.
Source: Kitco Read full article
Source: barchart.com
The jump in the dollar and real yields (10yr TIPS shown below) are a headwind for gold.
Source: @EPBResearch
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2. US lumber futures continue to soar.
Energy
1. US crude oil exports are rolling over.
2. The recovery in US refined product demand has paused.
Source: Princeton Energy Advisors
3. The rebound in retail gasoline prices has faded in recent weeks.
Source: Capital Economics
4. US crude oil and gasoline inventories remain elevated relative to last year.
5. US natural gas in storage is the highest in over five years.
Source: EIA
LNG demand remains soft.
Source: BCA Research
Emerging Markets
1. Brazil’s industrial confidence is rebounding quickly.
2. Next, we have a couple of updates on Turkey.
• Home prices are soaring.
• Foreign reserves collapsed this year.
Source: @markets Read full article
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3. Here is how we deal with political opponents in Russia.
Source: @WSJ Read full article
The ruble weakened (the chart shows the US dollar strengthening against the ruble).
Source: @TheTerminal, Bloomberg Finance L.P.
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4. Cyclically sensitive EM currencies have underperformed despite broad dollar weakness (2 charts).
Source: Barclays Research
Source: @WSJ Read full article
The United Kingdom
1. The CPI unexpectedly popped last month.
Source: Pantheon Macroeconomics
However, Pantheon Macroeconomics sees this as a transient move, with inflation easing in the months ahead.
Source: Pantheon Macroeconomics
Here is the PPI.
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2. The pound held resistance.
3. This year has been tough on white-collar workers.
Source: @adam_tooze, @FT Read full article
The Eurozone
1. The Eurozone’s core CPI jump will be reversed soon.
Source: Pantheon Macroeconomics
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2. Is the euro overvalued?
Source: @RobinBrooksIIF
3. Investors flocked to Germany’s 30yr debt auction.
Source: @markets Read full article
Canada
1. The CPI declined last month.
Air transportation was especially weak.
Source: Scotiabank Economics
Here are the contributions to the headline CPI.
Source: Scotiabank Economics
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2. June wholesale trade exceeded expectations.
3. The Oxford Economics recovery tracker continues to show gradual improvement.
Source: Oxford Economics
4. Dividend stocks have trailed the overall market by about 10% this year.
Source: Market Ethos, Richardson GMP
Here is the year-to-date performance of TSX sectors.
Source: Market Ethos, Richardson GMP
The United States
1. Home purchase mortgage activity is holding at multi-year highs.
2. The recovery in consumer sentiment remains fragile.
Source: @HPSInsight, @CivicScience
3. The World Economics SMI staffing levels index shows slower deterioration in the labor market but no recovery (SMI < 50 = contraction).
Source: World Economics
4. Childcare-related challenges remain a substantial drag on economic growth (2 charts).
Source: U.S. Census Bureau
Source: @business Read full article
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5. Fiscal support has been critical for the recovery.
• Compensation with and without pandemic relief (2 charts):
Source: BofA Merrill Lynch Global Research, @jsblokland
Source: Capital Economics
• Fiscal disbursements:
Source: Evercore ISI, @LizAnnSonders
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6. Freight activity is gradually improving.
• Shipments:
Source: Cass Information Systems
• Freight expenditures:
Source: Cass Information Systems
• Rail traffic (vs. last year):
Source: Cass Information Systems
• Truck freight demand remains weak.
Source: Cass Information Systems
Global Developments
1. The semiconductor equity market cap has sharply diverged from sales.
Source: BCA Research
2. Global equities’ market value is approaching $90 trillion.
Source: @DavidInglesTV
3. Fund managers increasingly see “early-cycle” rather than recession.
Source: @ISABELNET_SA, @BofAML
4. This chart shows fund managers’ views on inflation.
Source: BofA Merrill Lynch Global Research, @Saburgs
5. The US dollar seems to be oversold.
Source: Alpine Macro
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Food for Thought
1. Apple’s market value:
Source: The New York Times Read full article
2. Comfort level with different activities:
Source: Morning Consult Read full article
3. Visitors to Jamaica (year-over-year changes):
4. Sports fans’ demographic profile:
Source: @MorningConsult Read full article
5. COVID deaths by race and age:
Source: @WSJ Read full article
6. Dealing with plastic waste:
Source: @WSJ Read full article
7. Government communications, by topic:
Source: Arbor Research & Trading
8. Voting by mail:
Source: @WSJ Read full article
9. Broadband usage:
Source: @WSJ Read full article
10. Best-selling US electric vehicles:
Source: Statista
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